With 8% interest fees mounting, Selectmen agreed on February 12 to avoid further delay and pay the money owed South Street Nominee Trust as the result of a recent court decision found against the town. The dispute concerned roll-back taxes of $216,300 collected in 2002 when West Street property owned by the Trust was removed from Chapter 61 forestry restriction. Classification under state statute Chapter 61 allows property owners to pay reduced real estate tax while the land is used for forestry or agriculture, but under certain conditions roll-back taxes are due when the land is removed from the program. The Trust appealed the roll-back tax and eventually prevailed in court.

An interest charge is added to the judgment and continues to accrue until the bill is paid. Town Finance Director Larry Barton recommended that Carlisle pay by February 29, when the total due will stand at $309,599.

Because the expenditure has not been authorized by Town Meeting, Barton will write a letter to the Director of Accounts at the state Department of Revenue (DOR), seeking permission "to use any available funds to pay the judgment promptly." According to Barton, the town has enough ready assets to pay without borrowing funds.

In May, Town Meeting will be asked to formally authorize the expenditure from specific accounts. While town officials have time to consider various alternatives, Barton and Town Administrator Madonna McKenzie suggested one funding strategy, which they had also discussed with the Finance Committee on February 11. The suggestion was to request that the Board of Assessors release about $50,000 from their funds, with the remainder to come from the town's Stabilization Fund. Barton explained that if Town Meeting does not approve any sources for the expenditure, then departments' budgets would have to be trimmed to compensate, since the expense would then be made up from within the levy limit budget.

Financial details

For each fiscal year, the Assessors set aside money in an overlay account to cover real estate tax abatements. According to Barton, there may be roughly $50,000 available in the overlay accounts, mostly for FY04 and FY05, for which most abatement filings have been completed. If the Assessors agree to release the funds, a majority vote of Town Meeting could then authorize the expenditure of that money for the court case.

Barton explained that several years ago Town Meeting transferred approximately $190,000 in funds from the Assessors' excess overlay account to the Stabilization Fund in case the town lost in court. Using the Stabilization Fund will require a two-thirds majority at Town Meeting.

When this was discussed at the Financial Management Team meeting on Tuesday morning, Selectman Doug Stevenson hesitated to dip into the Stabilization Fund for more than was originally set aside (plus any interest earned.) He suggested using Free Cash to cover the remainder, but McKenzie warned that the town may need Free Cash for other things, such as paying the high school's FY08 extraordinary special education costs if state aid is unavailable.

Bond rating affected?

Barton pointed out that while taxes would not be affected directly by the plan, it would "depress our reserves." Recently, Carlisle's undesignated fund reserves, the sum of the Stabilization Fund and Free Cash, have been equal to about 11% of the town's $20 million annual operating budget. After using a quarter million dollars from the Stabilization Fund, the reserves would drop to about 8.5%, which officials worried might lower the town's bond rating. However, Barton felt that the bond rating would be affected more by the town's commitment to rebuild the reserves, rather than the short-term need to use the reserves for an unexpected expense.

Another $100,000 bill coming?

The town is involved in a second case of contested roll-back taxes for Hobblebush Lane property owned by the South Street Nominee Trust. The preliminary result was against the town, but the case has not been finalized. The town faces a possible additional exposure of $83,603 plus 8% interest since 2005, for a current total of $103,100. McKenzie suggested the town should be ready to handle it.